Blue Nile CEO MARK VADON was once an e-commerce agnostic. Living in San Francisco in the late 1990s, he didn’t understand why his friends joined one Internet venture after the other. In his line of work — consulting on leveraged buyouts — business health was all about cash flow, and Web commerce promised little.

It was his quest for an engagement ring that changed his mind. Ring-shopping led Vadon to a Seattle jeweler who, in his opinion, was “doing it right” selling on the Net. So right, Vadon bought the company in the spring of 1999.

Vadon’s early anti-Net sentiment may be partly responsible for Blue Nile’s success. Unlike its former dot-com fellows, his company eschews expensive marketing and advertising. It focuses on two core things — customer service and efficiency. “Our CFO says ‘Here at Blue Nile, we spare every expense,’” Vadon jokes.

How’s this for efficiency: Blue Nile posted about $72 million in 2002 sales, and expects to hit $100 million this year — all with just 100 employees.

And how’s this for service: Four customer service reps have been invited to weddings, including one young woman who made a mistake on an engagement ring order and flew across Washington state to hand-deliver the ring just in time for the big question.

Which leads us to the sad side of this tale. The No. 1 reason for returns at Blue Nile? Because she said no. Ouch.

Luckily for Blue Nile, many more say yes. The company estimates it’s the fifthteenth-largest specialty retailer in the U.S. And with online jewelry sales still only about $1.1 billion of the $45 billion U.S. market, Blue Nile has plenty of room to grow up.